This week we take a look at analyst picks that saw an upgrade in their target price or rating from brokerages.
- Jindal Steel and Power: ICICI Securities maintains its ‘Buy’ rating on this Iron & Steel Intermediate Products manufacturer and raises its target price to Rs 750 from Rs 605, which indicates a revision of 24%. With the new target price, the upside in the stock stands at 31.3%.
Analysts Amit Dixit, Mohit Lohia and Pritish Urumkar believe the ramp-up in captive thermal coal production and the acquisition of Monnet Power Co’s assets will improve cost efficiencies. They also see an increase in volume due to the company’s logistical advantages and capacity expansion. Although the analysts expect realisations to fall, they see cost efficiencies driving the expansion of margins.
The analysts add, “Jindal Steel and Power (JSPL) has been the top performer among mainstream ferrous players with a robust return of 45% in the past 3 months.” They anticipate the company’s growth to be driven by cost efficiencies and volume growth. The analysts expect Jindal Steel’s revenue to grow at a CAGR of 9.1% over FY22-24.
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SBI Life Insurance Co: KRChoksey keeps its ‘Buy’ rating on this Life Insurance company and increases its target price to Rs 1,750 from Rs 1,550, a revision of 12.9%. With the new target price, the upside now stands at 42.7%.
Analyst Abhishek Agarwal says the company is trading at an attractive valuation. Even though its Q3FY23 results have been a mixed bag, he expects healthy growth in the coming quarters. The renewal business has seen robust growth along with absolute value of new business (VNB), but the VNB margin contracted due to a higher share of Unit Linked Insurance Plan (ULIP). According to the analyst, “The company had been reporting 30%+ margins in the past few quarters but it contracted in Q3FY23 on the back of a higher share of the ULIP segment.” He believes that the strong margin growth in previous quarters will keep the annual margins healthy at 28-30% in FY23.
Agarwal expects the non-par guaranteed products to continue seeing healthy traction in the coming quarters. He believes that the insurance firm’s net profit will grow at a CAGR of 13.1% over FY22-25.
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Canara Bank: Motilal Oswal maintains its ‘Buy’ rating on this PSU Bank and raises its target price to Rs 410 from Rs 300, indicating a revision of 36.7%. The new target price implies an upside of 42.9%.
Analysts Nitin Aggarwal and Yash Agarwal remain positive on the company’s prospects as it has posted “strong operating performance supported by healthy traction in loan growth and improvement in asset quality, while margin expansion drove NII.” They add that loan growth is also healthy, led by the corporate, retail and agri segments. The improvement in asset quality, led by lower slippages and higher recoveries are seen as key positives by the analysts.
They believe, along with this healthy operational performance, margin expansion and lower provisions have aided in improving profitability. The analysts cite higher NII and lower provisions for raising their net profit estimates by 5% for FY23 and FY24 each. They anticipate the bank’s net profit to grow at a CAGR of 27.4% over FY23-25.
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Supreme Industries: ICICI Direct maintains its ‘Buy’ rating on the Plastic Pipes manufacturer and raises its target price to Rs 2,880 from Rs 2,600, implying a revision of 10.8%. The new target price implies an upside of 12.7%.
Analysts Sanjay Manyal, Hitesh Taunk and Ashwi Bhansali write that the company has posted healthy revenue growth on a YoY basis in Q3FY23, on the back of good volume growth. However, they point out that the margins and net profit are lower YoY but have expanded sequentially. They add that margins will gradually improve as inflation declines.
The analysts believe the company will be a major beneficiary of the Centre’s flagship scheme, ‘Nal Se Jal’, in the long term. They also expect the mix of value-added products in its portfolio to increase in the coming quarters. The analysts say, “Rising contribution of value-added products in the overall top line (increased from 35% in FY18 to ~38% in FY22) will keep the EBITDA margin elevated.” Manyal, Taunk and Bhansali expect the firm’s revenue to grow at a CAGR of 14.1% over FY22-25.
- LTIMindtree: IDBI Capital upgrades its rating on this IT Consulting & Software stock to ‘Buy’ from ‘Hold’ and raises its target price to Rs 5,000 from Rs 4,795, implying a revision of 4.3%. The new target price implies an upside of 13.1%.
Even though the company’s revenue has grown just 1.9% QoQ, analysts Dhevang Bhatt and Dhawal Doshi believe its revenue growth will increase as the merger-related issues iron out. They add, “In terms of synergies, the company is expected to benefit from cross-sell & up-sell opportunities, diversification of portfolio, inorganic growth, end-to-end services, client mining and larger deals.” The analysts also like the IT firm’s focus on winning efficiency deals in legacy and digital, allowing it to save costs.
The analysts note that the firm's cross-sell opportunities and ability to win large deals allow it to sustain healthy revenue growth in the long term. They also see margins improving in the medium term as supply-side pressures ease and operational efficiencies kick in. They expect the firm’s revenue to grow at a CAGR of 17.7% over FY22-25.
Note: These recommendations are from various analysts and are not recommendations by Trendlyne.
(You can find all analyst picks here)
